When it comes to buying a home, planning is essential. The sooner you get started, the better. That is especially true for most buyers who will need some financing to meet their goals. Our real estate agents are always glad to clear up your questions and make homebuying easier.
You don't have to have the perfect credit score or a huge down payment saved up to buy a home, but there are some things you should avoid doing. While lenders have a lot of leeway in deciding who to offer financing to, there are some issues that they simply won't be able to overlook.
Often, this doesn't come down to a pattern of behavior but a few simple mistakes here and there that can significantly upset the timeline of your purchase. Anything that changes your income or debt would impact your debt-to-income ratio, a formula most lenders are required to use in their decision-making.
Let's take a closer look at some of the things you should avoid before buying a home:
- Don't Buy a Car
One of the most common mistakes aspiring homebuyers make is taking out new credit obligations before their home financing is complete. Any new installment credit account, like a car or boat loan, makes your financial picture riskier. By contrast, it may be okay to accept an offer for revolving credit, like a credit card, as long as you don't use that new credit until after closing day.
- Don't Change Jobs Unless It's a Substantial Raise
Under normal circumstances, your creditors don't receive information about your new job or any other change in your income. Things are different when working with a bank to get a home loan: You must disclose changes that materially affect the loan decision. Changing jobs is generally seen as risky, not to mention a source of new stress—but that can be offset if you make more money.
- Don't Close Credit Accounts
Another aspect of the difference between installment and revolving credit is what you should do with your outstanding credit cards. The more revolving credit you have available to you, the better. That's why, although it's always wise to pay down your credit debt, closing the accounts you've paid down is rarely favorable. Doing so can actually lower your credit score and raise your interest rate.
- Don't Accept the First Financing Package You're Offered
Big banks aren't the only mortgage lenders on the scene anymore. There's a wide variety of smaller alternative lenders to choose from. Plus, the federal government operates all kinds of programs for helping first-time homebuyers. Although banks usually act as the lenders in these programs, they're required to follow rules to make the process easier. "Shopping around" can save you thousands.
Contact us to find out more about making your home-buying journey a success.